Corporate risk taking, R&D intensity and climate vulnerability: Proactive strategy for climate hazards

Abstract

Climate change has led to a significant shift in economic development. In this context, businesses are required to adapt to complex and uncertain conditions, where prioritizing sustainability and innovation is crucial. Consequently, a risk-taking approach has become a strategic necessity for businesses. This research examines the relationship between climate vulnerability, research and development (R&D) intensity, and corporate risk-taking, focusing on firms within the Basic Materials, Industrials, and Energy sectors across 12 countries. Using panel data from 2015 to 2022, the study reveals that climate vulnerability significantly constrains firms’ willingness to engage in risk-taking activities, particularly in high-risk environmental settings. While R&D intensity is positively associated with corporate risk-taking, the findings indicate that the moderating effect of climate vulnerability weakens this relationship, highlighting the challenges firms face when pursuing innovation under heightened environmental risks. These results provide valuable insights for businesses and policymakers, emphasizing the need for balanced strategies that support sustainability and innovation in climate-sensitive regions